Mortgage loan refinancing: conditions, best offers

2024 Author: Howard Calhoun | [email protected]. Last modified: 2023-12-17 10:16

Despite the fact that refinancing of loans has been on the list of banking services for a long time, in the Russian reality it appeared relatively recently. Literally since the development of mortgage lending. Along with the growth in demand for real estate, the financial services sector has also developed. Mortgage in the list of services of each bank occupies a leading position.

Mortgage loan refinancing: conditions, best offers

The financial market is developing and offers new tools for saving and increasing funds. Mortgages help when buying a home, and deposits are used to increase savings.

The practical application of such a service as mortgage refinancing was facilitated by the market trend of recent years, when the number of overdue loans began to gain momentum. Thus, today the service is gaining popularity, more and more banks are ready to consider requests for refinancing.

The essence of the procedure

Giving outloan, the bank expects to make a profit that covers all service costs plus its own income. Using a mortgage loan, the borrower believes that in this way he can move into housing now, and pay off over the next few years. But when it comes to finances, there are always risks. In this case, the borrower has the right to use on-lending.

The procedure is that the borrower applies to his or another bank for a new loan, the funds from which will be used to repay the old loan. According to the law, the bank does not have the right to refuse to issue a loan if the applicant meets all the requirements.

Mortgage refinancing is appropriate in the following cases:

• another bank offers lower interest rates;
• there is an opportunity to get a loan for a longer period and with low contributions;
• monthly repayment of the old loan becomes unbearable;
• there is an offer in another currency that is beneficial for the borrower.

But it is important to consider another point. Mortgage loan refinancing can be carried out in the same bank where the existing loan is repaid or in a new bank. The purpose of the procedure is to ease the borrower's credit burden.

When it comes to another institution, "their" bank may refuse to transfer documents and early repayment, as in this case it loses its profit and the client. This procedure is not prohibited by law.

Legalbase

The procedure is based on a number of draft laws and regulations. The Mortgage Refinance Act considers:

• Federal Law No. 122 of 1997;
• Regulation of the Central Bank of the Russian Federation No. 54 of 1998;
• Regulation of the Central Bank of the Russian Federation No. 254 of 2004;
• Federal Mortgage Law No. 102 of 1998;
• Civil Code, articles 355, 390 and 382;
• Order of the Ministry of Justice of the Russian Federation No. 289/235/290 of 2000;
• Federal Law No. 152-FZ of 2003

The above documents describe the procedure for registration, the rights and obligations of the borrower and the lender.

Important point: does the current contract allow the possibility of refinancing? Some banks initially prescribe its impossibility or pen alties for such a procedure. If it is not available or it is prohibited, then the client has the right to insist on inclusion in the contract.

Procedure steps

Refinancing a mortgage loan is a lengthy process that requires a number of legal issues to be resolved. The first stage is the study of offers on the market and calculations. It is important to consider here that the procedure requires some costs, which will be discussed below. Feasibility is determined on the basis of calculations made taking into account all associated costs.

It should be borne in mind that due to technical issues and high competition in the banking environment, not all financial institutions are positive about such an initiative of the borrower.

It is not enough to rely on publicly available information on a website orbank promotional materials. This may be a simple marketing ploy, while there is no mortgage refinancing program, and the offer is extended to other types of loans.

Collection of documents

The list of documents does not differ from what was submitted upon initial receipt. An indicative list contains the following documents:

• application for refinancing, which is filled out on the spot;
• income certificate: 2-personal income tax certificate, bank statement or other payment documents;
• applicant's national passport;
• for family - marriage certificate;
• documents for mortgage real estate: title document, contract of the transaction and certificates from government agencies on registration of rights;
• copy of bank mortgage agreement.

If it is planned to refinance a mortgage loan at Sberbank, then maternity capital may be involved. Depending on such circumstances, the bank may request additional documents:

• maternity capital certificate;
• birth certificate of children;
• bank statement on account balances.

If the bank requires the participation of guarantors, then these persons must also provide a list of documents, including proof of solvency.

Difficulties

When a borrower applies for mortgage refinancing to Sberbank or another financial institution, the current lender may refuse to issue somedocuments. In this case, a professional lawyer in the banking sector can help or a new lender can request documents for issuance.

It is also important to consider that when confirming income, you will have to provide two types of documents: in the form of 2-NDFL and in the form of a bank. Income figures, of course, must be above the minimum living wage ratio and sufficient to continue to cover monthly mortgage payments.

Another complication is that when refinancing a mortgage loan, banks may require collateral. Given the amount of the loan, only real estate can act as collateral. And mortgage real estate is still listed on the balance sheet of the first creditor.

In practice, in such cases, people resort to a little manipulation: they negotiate with a friend or relative who has an equivalent property, pledge this property as collateral, and after re-registering the mortgage, they return everything to its place.

Review Process

Acceptance means absolutely nothing. They can refuse even paying customers. But collateral can be a big argument. It is worth remembering that the more liquid the collateral is, the more likely it is to win the favor of the bank.

Also, a lot of words are said about the importance of credit history. But experts say that this moment is more relevant for small loans where there is no collateral. A good credit history never hurt anyone. The review process usually takes 5-7working days. If a positive decision is made, the registration process begins.

Costs

Refinancing a mortgage loan at a bank entails some costs that are entirely the responsibility of the applicant. In some financial institutions, even the procedure for considering an application takes place on a paid basis. In case of refusal, the funds will not be returned.

If the procedure is approved, then the applicant must be prepared for the following costs:

1. Evaluation of real estate. The law states that the procedure can be carried out by any appraiser who has the appropriate license. But banks have their own permanent partners on staff. If the bank insists on a specific appraiser, then the applicant is forced to agree with this.
2. The bank imposes the costs of processing the application and servicing a particular client on the clients. So, you will have to pay a commission for issuing a mortgage.
3. There is also a fee to transfer mortgaged housing from the old lender's balance sheet.
4. Registration of a new pledge or the same object is also paid.
5. Getting some types of help.
6. Insurance of credit, real estate or own income - according to the rules of the bank.
7. Payment of state duty, if there are notarial documents.

Depending on the conditions of the current lender, funds for early repayment of the loan and pen alties may be withdrawn.

Benefits

Choosing another bank, the client is always looking for more favorable conditions. Experts advise thatWhen refinancing a mortgage loan, the best offers bring tangible benefits if there is a difference in several parameters.

On what points should benefits be assessed?

1. Interest rate. How much lower? As a rule, if the difference does not exceed 3%, then, taking into account the costs of registration and inflation, the client may not win much in the end.
2. Change the deadline. A deep financial analysis, which not all ordinary citizens can do, shows that the “longer” the loan, the more expensive it is. Long term should be chosen if it is not currently possible to pay more.
3. Reduce your monthly fees. The same principle applies here: by winning now, in the end you can give more. But if the new offer is really profitable, then it should be considered individually.
4. Bundling of loans. Many Russians take out several loans. Practice shows that 2-3 payments per month is a heavy burden. Combining all the obligations into one, you can live much calmer.

Where to go?

Competition in the banking environment is high. But this situation only plays into the hands of consumers: they go where loans are cheaper. When considering mortgage refinancing, the best deals come from industry leaders:

• Sberbank – 10-12%
• VTB -24 – 9.7%
• Gazprombank – 9.2%
• Rossbank – 8.7%
• Bank of Russia – 11.5%

In 2018, due to a new wave of demand for real estate and the growth of economic indicators in the country, an increase in new offers is expected.

Refinancing deduction

Tax deduction - a refund of personal income tax that was previously paid by the employer in the form of personal income tax. His rate is 13%. The law provides for cases when a citizen can receive these funds back. The conditions for refinancing a mortgage loan allow the use of such social guarantees as maternity capital and tax deductions, if they were not used during the initial mortgage application.

If you plan to receive a tax deduction, you should notify the credit manager in advance, as this point must be reflected in the bank agreement.

The maximum deduction is 260,000 rubles. At the same time, there are requirements for the cost of the object: the price should not exceed 2 million rubles. The amount of the deduction is spread over the year. If the entire amount is not used within 1 calendar year, then at the beginning of the next year, the recipient must again submit an application to the tax office and collect the rest. There are two ways to return:

1. Transfer to a bank account in favor of paying off a mortgage.
2. Issuance of a notice from the tax office to the accounting department at the applicant's place of work. In this case, the money is not returned, and the applicant's income is exempt from personal income tax in the amount of the due deduction.

Conclusion

When obtaining a mortgage, each person must look far ahead and conduct an objective analysis of their own income. Risks accompany at every step. In this case, you should useservices of trusted insurance companies.

If the benefit of refinancing is obvious, but the bank refuses, then you should contact another bank. But the massive interest in refinancing is forcing these institutions to reconsider their approach. According to their clients, some are not ready to give clients to competitors and want to discuss new lending conditions. It is hardly worth counting on fundamental changes, but there is a theoretical possibility to simplify some indicators.